Tuesday, July 20, 2010

The true Mad Men of World Football

I'm not too sure why a random episode of the excellent AMC series "Mad Men" prompted me to write about the way soccer clubs spend their money, but I figure why fight it?

As we reach closer to the beginning of another European club season, you start to see how teams are shaping up for the new campaign. What you also get to see are all the new signings clubs have made over the past few months. For the supporter it's a time of endless hope, where the long standing members of the squad team up with the new boys in order to chase that moment of glory for your club. From Chelsea to Blackpool, Inter to Bari and Barca to Sporting Gjidon, every supporter believes it's their year, but what seems to get lost in the hysteria of the new club record signing, ownership trotted out at the club ground, is the price tag.

I found it interesting that during the global economic meltdown, with some of the largest and most important institution crumbling under the weight of bad financial decisions (Lehman Bros, GM, Chrysler, RBS etc..) Football seemed to be completely impervious to this. Now of course when I say this I mean the big world clubs as many of the smaller clubs REALLY felt the brunt of the economic down turn. Clubs like Portsmouth, West Ham, Crystal Place, Valencia, Lazio, Nice, Rangers have all had to make what were in effect austerity measures to stay afloat and out of administration, and in the end this was not even enough to save Pompey and Crystal Place from bankruptcy.

The Real Madrid's, Manchester United's Inter Milan's and Barcelona's of the world kept on chugging and spending as record levels. This time last year during the crush of uncertainty around the world economy, Real Madrid signed Kaka to a then World Record fee of 56 million Pounds. Less than a week later they signed Cristiano Ronaldo to an 80 million Pound deal breaking the record they set 6 days earlier. In total Real spent 224 Million Pounds on new players in the "silly season" in 2009. See breakdown below.

Real Madrid Player spending Between June and August 2009 (In Great British pounds)

Cristiano Ronaldo - £80m

• Kaka - £56m

• Karim Benzema - £35m

• Xabi Alonso - £20m

• Raul Albiol - £12.7m

• Alvaro Negredo - £4.2m

• Alvaro Arbeloa - £3.5m

• Esteban Granero - £3.4m
= Total: £224.8m ($359m)

No other business on earth at that time aside from the repossession industry was spending that kind of money in that short period of time. Other teams mentioned above spent well over 50 million dollars on new players and transfer fees. So many soccer writers and concerned supporters like myself have started to wonder, is there any thought given to football's place in the global economy?

It is now undeniable that major football clubs are in a small way linked to the free market economy. With many of these teams being owned either out of debt a la Manchester United, Liverpool or through the trading floor in the stock exchanges (almost every major team has some type of bond scheme). One has to wonder if football needs to be governed in a similar fashion to the financial industry.

UEFA president Michel Platini has been pushing for club financial responsibility by forwarding the concept that club may not spend more than they make in a fiscal year. Platini has also been pushing for a penalty for clubs who disregard the rule, the popular one being that the club would be barred from entering lucrative European club competitions like Champions League and Europa League. This particular measure if allowed to stand could cripple clubs like Manchester United, Barcelona, Real Madrid, Chelsea and the like who count on Champions League football as a revenue generator.

Many soccer writers in Europe point to the lack of quality soccer in the MLS North American league, but one thing they cannot touch is the overall financial health of the league. In an age where teams are filing for bankruptcy or in massive debt, the MLS is expanding and growing at a rapid rate. This is partly due to the salary cap structure that has been in place since day one. I agree with most that in order to attract the best players the MLS will need to raise its cap, and that current players deserve more money. However I believe that a salary cap does provide the teams with a level of self control when it comes to spending that the majority of teams in Europe do not have.

Is a Salary Cap the way forward for other clubs around the world? In some cases I believe it is, for others it will have to be a case of mixing real world economic factors into the traditions of soccer business, which until this point has been stuck in a very distant past.


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